Leasing Is More Than Just Renting A Car

Posted: 16th February 2018

Although car leasing has been around for quite some time now, for many of us, it’s all still a little confusing or misinterpreted. We get customers, coming into the forecourt and calling/emailing us frequently, filled with questions about the ins and out of leasing and what options they have. They have come across leasing terminology words like PCH - Personal Contract Hire, PCP – Personal Contract Purchase, Personal Lease Purchase but aren’t sure what they actually mean for them.

Many get the gist of car leasing, thinking it’s essentially a long-term car rental where you pay a fixed fee to drive the car, over an agreed amount of months/years. You then hand the car back and walk away with no ties. We have had a few customers worrying that this is then ‘dead money’ that they are paying, and enquire about buying a car rather. Due to so many questions, we thought we would try and clear everything up regarding car leasing; explaining the different types available, as well as showing that for most customers it isn’t ‘dead money’ at all, simply a lifestyle and financial choice they are making.

So how does car leasing work?

There are many options and it’s all down to what you are looking for as an individual, as well as your financial stance.

Credit checks - It is worth noting first and foremost that all car lease agreements are subject to a credit check, which you will have to pass. This doesn’t mean that you won’t be approved if you have bad or adverse credit, but a higher credit score will definitely get you a better interest rate. These credit checks also won’t assess your other outgoings, or whether you can afford to pay the monthly fee, so try and make sure you’ve budgeted and can afford them. If you can’t, it may affect your credit score, and it may affect your lease too.

So what are the different types of car lease available?

PCH – Personal Contract Hire

So as we touched on above, this is the type of leasing that most people are familiar with. You choose either a brand new or nearly new car and ‘rent’ it over a number of agreed years. At the end of the term, you simply give it back. You are essentially hiring the vehicle of your choice, and not having to worry about it after the lease has ended.

General PCH terms;

The lease agreement will last anything from 2-5 years

You may or may not have to pay an initial deposit - depending on the lease deal and company

You will have a credit check

You will never ‘own’ the vehicle, and will give it back at the end of the term

You can often get maintenance packages that include road tax, servicing, maintenance, warranty and even insurance sometimes.

Once the term is ended you can walk away or lease another car - no ties whatsoever.

You will agree a set amount of miles and will have to keep within that limit.

This type of lease is perfect for those who;

Want a new car every few years, to keep up with technology and safety

Those who only need a car for a set amount of years, perhaps in a particular job for example

Don’t want to deal with car value depreciation and having to sell it or lose money down the line

Don’t want to deal with maintenance of a car, having to take it to mechanics and get it serviced every year

Prefer to pay a monthly fee rather than an upfront lump sum to buy

PCP – Personal Contract Purchase

PHP is similar to PCH in the way that you would still pay a monthly fee for your vehicle, rather than be paying a lump sum to buy it upfront. The main difference here is that instead of ‘renting’ and returning at the end of the agreed term, you can then purchase the vehicle and own it. The great thing about PCP is that it is not mandatory, and if you change your mind and don’t want the car at the end, you can arrange to give it back.

PCP General Terms;

The lease agreement will last anything from 2-5 years

You may or may not have to pay an initial deposit - depending on the lease deal and company

You will have a credit check

You will have the option to buy the vehicle at the end of the agreement

You won’t pay VAT on the monthly payments unless you add a maintenance package

Fixed optional final payment when you first take out the contract

You can often get maintenance packages that include road tax, servicing, maintenance, warranty and even insurance sometimes.

Once the term is ended, and final payments are made, the car is yours to own and keep

This type of lease is perfect for those who;

Want a new car to own

Can’t afford to buy a brand new car upfront

Want lower monthly payments than PCH

Want to know that they are paying to own the vehicle

Are happy to take on the maintenance and cost of the vehicle after the lease has ended

Personal Lease Purchase

Some car leases are rigid and not flexible at the end of the lease term, meaning that you agree from the beginning that you will definitely purchase the vehicle at the end of the term. This is Personal lease purchase. You will agree to monthly payments and then a balloon payment at the end, much like PCP, but the difference here is that you don’t have the option to opt out at the end and return the car. Again, this is a great option if you know what car you want to own, but you can’t afford to buy it upfront.

So what’s the better leasing option?

We really feel that it is all down to individual choice and financial circumstances.

Do you want to own a car that you can’t afford? Want to feel that your monthly payments are going towards an end goal of something you’ll own? Then a PLP would be great for you.

Do you want the luxury of a brand new car every few years, without having any hassle of selling or maintaining it? Do you need a car just for a few years whilst studying or working? Then PCH is the best option for you.

Not sure if you want to hire it and give it back, or own it at the end. No problem, PCP could work for you too, as you have flexible options at the end to swap, keep or walk away.

We hope we have cleared the leasing options up for you somewhat, but of course, we are here 7 days a week should you need to discuss your individual leasing needs with us.

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Zero Deposit Car Leasing is a trading style of Hippo Vehicle Solutions Ltd (Company Number: 06215364). Hippo Vehicle Solutions is authorised and regulated by the Financial Conduct Authority FRN:658076. Hippo vehicle solutions trading as Zero Deposit Car Leasing is an Appointed Representative of Autoprotect MBI Ltd for insurance mediation purposes. Autoprotect MBI Ltd is authorised and regulated by the Financial Conduct Authority , its firm reference number is 312143. All offers are subject to change at any time and are subject to finance approval. We are a broker not a lender and our registered office is Trident Park, Trident Way, Blackburn BB1 3NU. Our contact number is 01254 919000

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